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Many on Wall Street rejected Carlyle before it hired new CEO

MAUREEN FARRELL ROB COPELAND KATE KELLY

In November, Bill Conway, then interim CEO of Carlyle, the investing behemoth he helped to start in 1987, walked around the firm’s Manhattan headquarters asking younger employees: “Would you like to take my job?”

It was an awkward joke, according to an employee who heard about it at the time, one made even less funny by the firm’s predicament.

A few months earlier, Conway and his co-founders, David Rubenstein and Daniel D’Aniello, had ousted their hand-picked successor, Kewsong Lee, partly because their feelings were hurt over how infrequently he sought their advice. The co-founders, all billionaires, said they would take a more active role as Carlyle began its search for a new CEO.

But as the process dragged on, Conway, 73, grew increasingly frustrated, telling colleagues that he found the job too taxing and that it was affecting his health, according to three people familiar with the conversations.

On Monday, Conway finally handed the reins to Harvey M. Schwartz, a former Goldman Sachs executive who had spent much of the past five years practising guitar, karate, biking and meditating on the West Coast, said two people with knowledge of the activities. He left the investment bank after being passed over for the top job — in part because of his harsh demeanour towards subordinates, two people with knowledge of the matter said. He also served on company boards, including SoFi Technologies, an online lender.

Schwartz, 58, did not respond to requests for comment.

In a virtual meeting Monday, he told Carlyle’s roughly 2,100 employees that he had a mandate to expand its business, according to an attendee who was not authorised to speak publicly. “And you want to have some fun, and growth is fun,” Schwartz said.

“Given his experience, track record and skill set, the board was unanimous in its determination that he is the right leader to drive Carlyle forward,” Conway and Rubenstein said in a statement.

Schwartz could earn up to $180 million over a five-year-period, if the stock outperforms most of its publicly traded competitors, Carlyle said in a filing Monday. That would come on top of an annual salary of $1 million and a bonus of up to $6 million a year.

Carlyle shares dropped 5% immediately after the announcement, but recovered to close down 3%. The firm was to report fourth-quarter earnings yesterday, which analysts expected to be significantly lower than the previous quarter.

NOT CARLYLE’S FIRST CHOICE

Although the firm manages $369 billion in assets, placing it solidly within the industry’s top tier, its employees and clients have been shaken by the suddenness of Lee’s departure last summer and the long hunt for a replacement.

“It’s not an easy situation to parachute into,” said Glenn Schorr, an analyst at Evercore ISI.

A former chief financial officer of Goldman, Schwartz was not Carlyle’s first choice. Representatives of the private equity firm had reached out to at least half a dozen high-profile Wall Street executives, including Gary Cohn, a former president of Goldman, and Mary Erdoes of JPMorgan Chase, who is seen as a possible successor to Jamie Dimon, that bank’s CEO, according to people with direct knowledge of those conversations.

It is a painful moment for Carlyle, a storied investment firm founded by Conway, Rubenstein and D’Aniello in Washington, DC. One of its biggest deals, the purchase of the military equipment maker United Defense Industries in 1997, established it as a big player in the defence and aerospace industries. Critics also said Carlyle benefited from its extensive ties with politicians, recruiting former President George H.W. Bush and the former British Prime Minister John Major as consultants after they left office.

In 2017, Lee, who had joined Carlyle four years earlier, and Glenn Youngkin, a longtime executive for the firm, were named co-CEOs after Conway and Rubenstein said they would step down from their roles as co-CEOs. Beginning in 2018, the two co-founders became co-executive chairmen, and D’Aniello, Carlyle’s chairman at the time, became chairman emeritus.

In September 2020, Youngkin stepped down to run for governor of Virginia, leaving Lee as sole CEO. But after barely two years in the role, Lee abruptly left Carlyle. When the firm announced his departure — on a Sunday night — it said there was no successor in place.

In an interview with The New York Times the next month, Rubenstein said he had been frustrated by Lee’s lack of interest in his advice. “He would spend a lot of time talking to somebody that would own 1% of the company or 2% of the company or 3%,” Rubenstein said. “But we owned 35%,” he added, referring to his fellow founders.

Then began the search for a new CEO.

UNORTHODOX STYLE

In addition to Erdoes and Cohn, Carlyle approached a number of high profile Wall Street executives: John Waldron, a potential successor to Goldman’s CEO, David Solomon; Nasdaq’s CEO, Adena Friedman; Alison Mass, who leads Goldman’s investment banking division; Greg Fleming, a former Morgan Stanley executive; David McCormick, who once ran Bridgewater Associates and lost a Senate primary race last year; Ralph Schlosstein, a co-founder of BlackRock; and the former JPMorgan operating chief Matthew Zames, according to people with direct knowledge of the talks. Some of them declined to be interviewed for the job.

Schwartz will have his work cut out for him, especially given the souring environment for fundraising amid a possible economic downturn.

A onetime kosher butcher-shop worker and Rutgers University graduate, Schwartz worked early in his career as a commodities and currency trader, eventually rising to president and cochief operating officer of Goldman.

Before the bank’s quarterly earnings calls, he would blast music by the rock band the Counting Crows in his office. At one buttoned-up Goldman partners’ meeting, he donned aviator sunglasses, former colleagues said. But after leaving the firm in 2018, Schwartz moved to San Diego and has been mostly absent from Wall Street.

“Carlyle is lucky to get someone of his quality,” said Lloyd Blankfein, a former CEO of Goldman, who credited Schwartz, his onetime deputy, with taking on “tough jobs at tough moments,” like helping to steer the bank through the 2008 financial crisis and dealing with regulatory scrutiny.

‘‘ Given his experience, track record and skill set ... he is the right leader to drive Carlyle forward. BILL CONWAY Co-founder of global investment firm Carlyle

BUSINESS

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2023-02-08T08:00:00.0000000Z

2023-02-08T08:00:00.0000000Z

https://bangkokpost.pressreader.com/article/282153590436688

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